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Does Merit Pay For Teachers Have Merit? Pros And Cons Of New Models For Teacher Compensation

Although popular in public opinion polls, merit pay - also called performance pay - faces stiff opposition from teacher organizations when linked to student test scores. Critics contend compensating teachers based on evaluations and student test scores could be a slippery slope leading to abuse. Supporters counter that rewarding highly effective teachers is not only appropriate, but also is a policy that should be encouraged to promote teacher growth.

Twenty-five years ago, two recent college graduates entered the teaching profession and began working at the same school. It didn’t matter if they were male or female; black, white or Latino; whether they graduated from a state teaching college or a prestigious Ivy League school. In nearly all public school districts, both teachers would earn the same amount, provided they had the same level of education and number of years teaching.

Throughout their teaching career, the amount they would be paid would remain identical, firmly controlled by a tidy salary schedule determined exclusively by those two factors: the number of years of teaching experience and level of education. Their salaries could increase for sponsoring extracurricular activities or taking on additional duties, such as serving as department chair, coaching an athletic team or teaching summer school.

Whether one teacher had consistently higher evaluations wouldn’t alter his or her compensation. The teacher’s pay also wouldn’t increase if his or her students consistently outperformed the other teacher’s students in annual end-of-year assessments.

The times, however, appear to be changing. Since 2007, legislatures in at least 28 states have introduced legislation that would replace the traditional pay system with an alternative based on evaluations and/or student achievement. Performance pay also appears to have struck a chord with the public. According to a TIME magazine poll released in September 2010, 71 percent support the idea of paying teachers based on their effectiveness in the classroom—not automatic step increases based on how long they’ve been teaching.1

Although popular in public opinion polls, merit pay, also called performance pay, when linked to student test scores, faces stiff opposition from teacher organizations. Critics contend compensating teachers based on evaluations and student test scores could be a slippery slope leading to abuse. Clearly, when determining which teachers are effective and which are not, and how to reward those who are, policymakers will face numerous complex issues.

The Development of Teacher Pay

Performance pay, if enduring, would mark at least the fourth major evolution of teacher compensation in the U.S. Until the late 19th century, teacher pay was largely based on a so-called “boarding round” system. Because most of the U.S. population lived in rural farming communities with one-room schoolhouses and few students, teacher compensation was limited to a small stipend. Their pay was supplemented by room and board that involved rotating teachers’ residences weekly from one student’s home to another.2

By the late 1800s, the more industrialized U.S. economy led to increased reliance on a well-educated workforce. This resulted in more schools, more students and more teachers who required more skill. A new compensation model paid teachers based on the level of knowledge and skill needed to educate a child.

Because it was generally accepted at the time that elementary teachers required fewer skills than secondary teachers, they tended to be paid less. Women and minority teachers also tended to be paid less than men and nonminority teachers. Furthermore, subjective administrator evaluations of teacher merit were used in determining teacher compensation, exacerbating pay gaps.3

The single-salary schedule that is now commonplace developed shortly after the turn of the 20th century when labor leaders called for better working conditions and higher salaries for employees. The single-salary schedule established a system of uniform pay steps that ensured teachers with the same years of experience and education received the same salary.3

Since its creation, the single-salary schedule has been almost universally embedded in this country. By 1950, 97 percent of all schools had adopted the model. That percentage remained virtually unchanged in a 2007 study.3

In some states and school districts, however, the single-salary schedule has been replaced by another system of teacher compensation—performance pay. Many legislators have begun looking for alternate pay models that differentiate between teachers demonstrating exceptional skills and those who are less proficient. In those states, signs indicate the single-salary schedule may unravel. That may signal the beginning of the next incarnation of teacher compensation.

The single-salary schedule ensured fairness and objectivity. It erased discrimination in pay for female and minority teachers with identical experience and education as their male and nonminority colleagues. Since the 1960s and 1970s, with the advent of collective bargaining, unions representing teachers—affiliates of the National Education Association and American Federation of Teachers—have come to regard the single-salary schedule as the compensation model that offered teachers a system of equitable, objective and predictable salary distribution.4

One issue about which almost everyone agrees is the state of teacher pay and attrition are disturbing and potentially catastrophic to the teaching profession. Average teacher salaries have not risen as quickly as inflation or on pace with other professions.5 (See table for a state-by-state breakdown of average teacher salaries.)

Nearly half of all teachers leave the profession within five years, with attrition rates highest in schools serving low-income students.6 Fewer students scoring in the top 10 percent on high school achievement tests are entering teaching than in the past. One study shows 24 percent of the top decile of high school students from 1971-74 became teachers, compared to just 11 percent in 2000.7

The Center for Teaching Quality, a research and policy organization, states in a 2011 report, “We agree that it is time to change the way teachers are paid. The system used today is one from a bygone era. … We recognize that the time has come for compensation programs that differentiate among levels of effort and performance.”8

The report cautions, however, about a “checkered history” of differentiated pay characterized by administrators who do not understand how or have the time to judge good teaching or by information systems that result in untrustworthy data.

Supporters of performance pay argue changing teacher compensation that rewards the best teachers will result in better qualified, more academically advanced people entering the teaching profession. They also contend rewarding the best teachers will slow attrition rates by keeping them in the teaching profession longer.

What is performance pay?

Performance pay can take different forms. In its most basic concept, however, performance pay compensates teachers based on successes determined by a set of performance standards—in short, factors other than level of education and teaching experience. The more effectively the teacher performs in the classroom, the more the teacher is paid. It typically involves evaluations by administrators and peer reviews. In some cases, student achievement scores determine a percentage of performance pay.

Although performance pay most commonly involves monetary rewards given to individual teachers, it can involve other designs. It also can be structured as a team incentive program, with group performance determining the total incentive payment, which is then divided among team members regardless of individual performance. The group can include all teachers within a school or a subgroup, such as the teachers of a given grade or a particular subject. Performance pay models also can involve sanctions for below‐threshold performance. Other incentives besides money can include reduced teaching load, promotion and public recognition of outstanding teachers. The reward can be single bonus or ongoing, leading to a permanent salary increase.9

Clearly the most incendiary element to some performance pay models is when merit pay is based in part on student achievement test scores. Several states and school districts have implemented performance pay models that include a student test score component. One issue, however, is teachers with three or more years of experience tend to be assigned students who are more academically advanced. They are also less likely than newer teachers to have students who are English language learners, have Individualized Education Programs, or who qualify for free or reduced-price lunch.10 Consequently, when using raw test score data to determine teacher success, more experienced teachers will, in all probability, have students who outperform those of more inexperienced teachers, perhaps unrelated to the teacher’s proficiency.

So-called “value-added assessment,” in contrast, is a statistical tool used to track the progress of individual students based on their performance on state—or other—tests over two or more points in time, typically from one school year to the next. In other words, whether a teacher has advanced students, or has students with more limited academic skills, the students’ progress from one year to the next would reflect on the teacher’s effectiveness.

By tracking progress from year to year, one can more easily evaluate the effectiveness of the teacher than by simply basing these decisions on raw test data. Value-added assessment assumes that teachers are the most important factor in student learning and that the amount of “value” the teacher “adds” to each student can be precisely measured. Dr. William Sanders, who was, at that time, located at the University of Tennessee, first developed value-added assessments. The state of Tennessee adopted the model in the early 1990s as a statewide system of evaluation. Similar assessments have been implemented in other locations, including Colorado, Pennsylvania and Texas.11

The case for performance pay

The argument in favor of performance-based-pay, in essence, has gone something like this: Not all teachers are equal; some are more effective than others. Therefore, more effective teachers should be paid more than ones who are less effective. In the private sector, workers who demonstrate exceptional skills are often rewarded with higher pay, while those who fail to meet high standards are not. By extension then, teachers’ and administrators’ salaries should also be based on job performance.

That’s a point Florida Sen. Stephen Wise raised when he rallied for support for Senate Bill 736, also known as The Student Success Act. The legislation, which Gov. Rick Scott signed into law in March 2011, implements a performance pay system. It requires at least half of teachers’ evaluations to be based on student learning gains. It was not the first time Florida has enacted a performance pay system for teachers, but does mark the most sweeping overhaul of the way teachers are paid.

Wise argued teachers should not be rewarded based on longevity. So he has instead successfully pushed for incentives tied in part to student achievement. “And there’s something fundamentally wrong without incentives,” he said. “And (we’ve) put together the incentive program so that teachers will be able to inspire kids.”

He added, “I’m for teachers being able to be paid as much as they possibly can because they really work hard. But I want to have good teachers who are exceptional and who are highly qualified. That’s why I’m doing this, because I think we need an evaluation system that sorts out the teachers who are effective and highly effective, so we can reward them.”

Rep. Erik Fresen, another of the bill’s advocates, declared, “Excellent teachers are the driving force behind student success and this (law) provides for a system that recognizes those highly effective educators and rewards them appropriately.” The bill passed despite strong objections from the Florida Education Association.

Supporters of performance pay use the following points in defending a new compensation model for teachers:

Teachers must be held more accountable and judged in relation to their peers. Evaluation is part of being a professional;

Teachers are motivated, in part, by compensation. Therefore, rewarding teachers who demonstrate excellence in the classroom will serve as an inducement for them to work harder and be more innovative; and

Rewarding highly effective teachers will result in them remaining in the teaching profession longer.

In an op-ed column in The Washington Post in February 2011, Microsoft co-founder Bill Gates contends education in the U.S. does not measure and promote excellence. He wrote, “The United States spends $50 billion a year on automatic salary increases based on teacher seniority. It’s reasonable to suppose that teachers who have served longer are more effective, but the evidence says that’s not true. After the first few years, seniority seems to have no effect on student achievement.”12

The Bill & Melinda Gates Foundation has funded an initiative that is working with 3,000 teachers in seven urban school districts to develop “fair and reliable measures of teacher effectiveness that are tied to gains in student achievement.”10

In an article published in Policy Review, Frederick M. Hess, director of educational studies at the American Enterprise Institute, wrote, “Few things are more frustrating for high performers than to be treated exactly like their less committed peers. Today, the profession repels too many energetic practitioners by expecting teachers to willingly sacrifice professional growth, advancement and reward.13

“Paying for performance and for critical skills does more than deliver rewards to the most deserving. When done sensibly, it sends a vital message about the organization’s priorities and values.”13

The case against performance pay

Teachers have argued performance pay could lead to subjective or biased reviews, favoritism or other abuses. They also contend compensating them based on how their students score on standardized tests is unfair and not an accurate determinant in whether they are good teachers.

Other arguments against performance pay include:

It creates competition among teachers rather than cooperation;

There is no clear definition of what constitutes a “good teacher”;

Teachers won’t want to teach the most challenging students;

Teachers are not the students’ only influence; and

Teaching is not a business and should not be compensated using the same models used in business.

Both the National Education Association and American Federation of Teachers oppose performance pay based on student test scores. Both organizations, however, support the concept of performance pay if fair and equitable standards can be developed to base evaluation.

Rob Weil, director of field programs for education issues at AFT, acknowledges teachers’ work does influence student performance. “There is a link between teaching and learning. But we’ve said, ‘Let’s use the correct indicators of that learning,’ and we believe those large-scale assessments are not the best indicators.”

Weil said most states and school districts that have implemented performance pay systems have done so in a politically expedient manner without looking at what makes differentiated compensation work.

“I do believe we need to change compensation in this country, but I think that’s two or three steps down the road right now. The first thing is what effective teaching is and how we measure it,” he said. “Are we putting the cart before the horse if we pay for effectiveness if we don’t know what it is?”

He also points out less than 30 percent of all educators teach core subjects that are tested on standardized state assessments. A plan to include all teachers in a performance pay system, then, would be difficult if student performance is used in determining compensation.

Allegations of teachers cheating on their students’ testing also have cast a cloud over the issue of merit pay. In Atlanta in 2011, nearly 180 teachers and 38 principals were implicated in a widespread teacher cheating scandal.

Similar accusations of cheating have come out of schools in Washington, D.C., Philadelphia and Houston. These scandals are escalating the debate over whether rewarding teachers based on student test scores might create an environment leading to more episodes of cheating by educators lured by the promise of hefty bonuses when students outperform expectations.

State and local examples of performance pay

When Florida legislators enacted Senate Bill 736 in 2011, it marked a dramatic shift in how educators in the Sunshine State will be compensated starting in 2014. Florida’s new law means that students’ performance on state end-of-year tests will count for half of a new teacher’s evaluation. The other half will rest with the principal. Those evaluations would be the basis for yearly pay raises. A similar bill passed Florida’s legislature in 2010, but was vetoed by then-Gov. Charlie Crist.

Florida is not alone in looking at teacher performance pay policy. Slowly, but increasingly, legislators in a number of states have introduced measures to enact models of performance pay in their states.

Nebraska also has enacted legislation that establishes performance pay, subject to collective bargaining agreements, beginning with the 2016-17 school year. Money to pay bonuses would come from wind and solar energy leases on some of the 1.3 million acres owned by the state Board of Educational Lands and Funds.

Idaho legislators passed Senate Bill 1110 in 2011, which will implement performance pay for teachers. Under the bill, teachers could earn bonuses up to $8,000 above their base pay for teaching in hard-to-fill positions; for teaching in schools with improved student test scores; and for taking on leadership roles including mentoring new teachers.

The measure is expected to cost $38 million in 2013 and more than $50 million each year thereafter. The state will distribute funding to local districts from salary-based apportionment and discretionary funds. The law requires each local board of trustees to develop a plan for awarding pay for performance shares to its certified employees.

Idaho’s Superintendent of Public Instruction Tom Luna said in a news release following passage of the bill, “This bill is another monumental step toward reforming our public education system. With this bill, Idaho now has the most comprehensive statewide pay-for-performance plan in the country. This legislation is all about recognizing and rewarding our great teachers for the outstanding work they do every day.”

Virginia Gov. Bob McDonnell also announced in July 2011 his state will begin a pilot program involving performance pay in 25 schools during the 2011-12 school year. Participating schools must implement performance standards and a teacher evaluation system that bases 40 percent of a teacher’s evaluation on student academic growth. Virginia’s General Assembly appropriated $3 million for the program, which will provide bonuses up to $5,000 for teachers receiving exemplary ratings.14

“Teachers who make a commitment to students in hard-to-staff urban and rural schools, despite circumstances that often prompt colleagues to seek assignments elsewhere, deserve our admiration, and when they succeed in raising the achievement of students in these schools, their performance should be rewarded,” McDonnell said.

McDonnell’s plan was dealt a setback, however, when the state’s largest school district, Fairfax County Public Schools, rejected joining the program, even though it would have brought additional funding to the district.15 In fact, as of late June, only 6 percent of eligible schools have agreed to participate in the program, according to The Washington Post.

Missouri lawmakers also considered a bill similar to Florida’s during the 2011 session. It would have required 50 percent of a teacher’s evaluation to be based on students’ scores on state tests. Unlike Florida, however, the Missouri legislature failed to act on House Bill 628. Still, it provided a clear message that alternatives to the standard single-salary pay schedule are gaining traction.

The Minnesota legislature in 2005 enacted its Quality Compensation for Teachers, better known as Q Comp. It is an entirely voluntary program that allows local districts and teacher representatives to collectively bargain a plan that meets five components: 1) a career ladder/advancement options; 2) job-embedded professional development; 3) teacher evaluation; 4) performance pay; and 5) an alternative salary schedule. School districts can receive up to $260 per student to pay for the program. Fifty Minnesota school districts and 54 charter schools implemented Q Comp during the 2010-11 school year.16

A 2010 report by the National Council on Teacher Quality found 35 states do not require student achievement data to be a component of teacher evaluations.Not all of the 19 states that support performance pay have programs that recognize appropriate uses and limitations. Only 16 states explicitly connect performance pay to evidence of student achievement, and only 14 states ensure that all teachers are able to participate, whether or not they have students who take standardized tests.17

What research says about performance pay

One of the most critical, yet often overlooked, questions about teacher performance pay is whether any evidence shows it results in higher student achievement. The question has no clear answer, only contradictory findings that further muddy the policy waters.

In 2010, researchers from Vanderbilt University’s George Peabody College of Education released a report concluding rewarding teachers with bonus pay, in the absence of any other support programs, does not raise student test scores.18

Over three years, nearly 300 math teachers in grades 5-8 in Metropolitan Nashville Public Schools participated in the Project on Incentives in Teaching.

Half of the volunteers were assigned to a group that was eligible for bonuses up to $15,000 per year on the basis of their students’ test-score gains on the Tennessee Comprehensive Assessment Program. The other half, assigned to a control group, were not eligible for these bonuses. Students of teachers randomly assigned to the group eligible for bonuses did not outperform students whose teachers were assigned to the control group, the research showed.19

Matthew Springer, executive director of the National Center on Performance Incentives said, “We sought a clean test of the basic proposition: If teachers know they will be rewarded for an increase in their students’ test scores, will the test scores go up? We found that the answer to that question is ‘no.’

“That by no means implies that some other incentive plan would not be successful,” he added.

National Education Association President Dennis Van Roekel said the report’s findings were not surprising. “Extra money is not a silver bullet,” he said. “It must be part of a comprehensive system that invests in things that make a difference in teaching and learning, such as experience, knowledge and skills. You have to start with a base of strong, competitive professional salaries and then reward teachers for professional growth and offer mentoring, support and solid feedback to help them improve their craft.”

More recently, a similar multi-year study of performance pay in New York City schools conducted by the RAND Corporation also found “bonuses alone have not proven to be the answer to bettering student achievement.” Researchers found no differences between the reported teaching practices, effort and attitudes of teachers in treatment schools and those of the control group.20Shortly after the study’s report was released, New York City’s Department of Education abandoned its merit pay program.

Two other university studies, however, have yielded different results. Research at the University of Arkansas examined a merit pay pilot program in Little Rock. Under the Achievement Challenge Pilot Project, teachers could earn as much as an $11,000 bonus based on how much their students’ test scores improved. The study concluded students of teachers who were eligible for performance bonuses performed at a higher academic level than those in the control group.21 Despite the findings, Little Rock teachers rejected district-wide merit pay by a 256-42 vote in 2006.

Finally, two economics professors at the University of Florida analyzed surveys from more than 500 schools nationwide and concluded students perform better on tests when their teachers are given merit pay increases.22

Despite contradictory research findings, the NEA maintains no evidence exists linking performance pay with higher student achievement. “People look for simplistic solutions and they say, ‘If we just pay for test scores, things will be better.’ The evidence doesn’t support that,” he said. “That doesn’t provide the kind of training, evaluation and professional development that a teacher needs to improve his or her skills.”

Rob Weil, of the American Federation of Teachers, adds, “We tend to work in an evidence-free zone. ‘Regardless of what the evidence says, that’s not what we’re going to do. We’re going to do what will get us the most votes and people think is the easiest to implement.’”

The ‘middle ground’

In the debate over teacher compensation, two extreme viewpoints seem to stand out. While some call for a drastic shift to a model basing teacher pay, in part, on the performance of their students, others prefer to retain the single salary schedule. However, Bill Raabe said the debate often overlooks the “middle ground”—one that rewards teachers based on their classroom successes, not based on student test scores.

“I think where we don’t make much progress in the debate is we’re talking either pay for test scores, for example, or the current structure as it exists and we fail to talk about what’s in between,” he explained.

The NEA is proposing a teacher pay system called The Professional Growth Salary Schedule, which would:

Provide a career path for teachers who want to take on more responsibility without having to leave the classroom to become administrators;

Reward teachers who attain and demonstrate skills that improve their teaching;

Recognize and compensate teachers for the duties their daily work entails outside of their direct classroom teaching; and

Place teachers on par with the salary, professional growth opportunities and career earnings of other college-educated professionals.

NEA’s proposal calls for teachers to start with a minimum base-pay level of $40,000. It would create four tiers, or salary levels, that teachers could reach based on what Raabe calls “a quality evaluation system” developed with involvement of teachers. These evaluations, Raabe contends, will allow administrators to determine whether teachers early in their careers can be successful and what types of professional development experienced teachers need to become more successful.

Raabe indicated teachers are willing to accept a new compensation model as long as it’s fair and equitable. “I know it’s going to be difficult. There are people on all sides of this issue who have very strong opinions,” Raabe said. But he also indicated NEA will not support performance pay in which student test scores are used to determine teacher pay.

“One of the things we have struggled with in education for a long time is ‘What is a quality evaluation.’ We need to be surrounded by a quality evaluation system, a system that’s been developed between the school employees and the administration. A system that defines what teacher effectiveness is. A system that has performance standards that people understand. And then it’s a system that people believe is credible, reliable and valid,” he said.

Conclusion

Given current political trends and public opinion, an evolution to a new merit-based compensation model appears inevitable in many states and local school districts. Yet teacher organizations are firmly entrenched in their opposition to any teacher pay system that is linked to student test scores.

Studies examining the relationship of teacher performance pay and student achievement are inconclusive. Many also are concerned that a reward system based on student assessment might result in more episodes of teacher cheating, such as scandals that have emerged in recent years.

Performance-based pay systems also could have other unintended consequences, such as increased competition among teachers for limited bonus funding as well as the possibility of favoritism or bias on teacher evaluations conducted by administrators.

Nevertheless, it appears there is room for teacher groups and state policymakers to agree on a system that provides incentives for teaching excellence based on multiple criteria, including valid and credible evaluations. Both NEA and AFT concur existing pay systems can be improved, but contend compensation should not be based on student test data.

The U.S. Department of Education, meanwhile, has put a great deal of effort into luring school districts and states to enact merit-pay systems as part of its Race to the Top competition. In a speech at the National Board of Professional Teaching Standards in July 2011, U.S. Education Secretary Arne Duncan said teachers should have annual salaries starting at $60,000 and the opportunity to make up to $150,000 based on performance.

“If teachers are to be treated and compensated as the true professionals they are, the profession will need to shift away from an industrial era blue-collar model of compensation to rewarding effectiveness and performance,” he said. “Money is never the reason why people enter teaching, but it is the reason why some people do not enter teaching, or leave as they start to think about beginning a family and buying a home.”23

Denver performance pay system considered by many to be model

The pioneering example in teacher performance pay does not involve a state educational system, rather a local one. Denver Public Schools’ ProComp teacher compensation system, implemented in 2006, provides pay increases for teachers meeting multiple criteria.

In November 2005, Denver voters approved a tax increase to fund ProComp. Nearly 60 percent of members of the Denver Classroom Teachers Association also approved the switch to merit-based pay.

Initially, teachers employed by Denver Public Schools had the option to opt in or out of the system. All teachers hired after 2006 were required to join. ProComp has enabled teachers at top performance levels to receive as much as $15,000 per year in addition to their base pay.1

Specifically, the system is divided into four components that allow teachers to increase their compensation. One is referred to as the Market Incentive Component. Educators who work in positions that are considered difficult to fill receive a 3 percent bonus. Hard-to-staff assignments are classified as those where the supply of licensed professionals is low and the turnover rate is high.2

The other components are:

Knowledge and skills: Teachers receive a 2 percent salary increase after completing professional development or approved courses. They can also fulfill this component by earning a graduate degree or National Board Certificate.

Satisfactory evaluation: Teachers can receive a 3 percent salary increase after a satisfactory evaluation, given every three years.

Student growth: Teachers must set two annual objectives. Teachers receive a 1 percent increase for each objective they meet. Teachers also receive pay raises if they work in schools defined as “distinguished” or if their students exceed an agreed-upon score on state testing.2

An evaluation of ProComp conducted by the University of Colorado at Boulder, released in 2010, concludes the compensation system is paying off. Some of the findings include an increase in mathematics and reading achievement. The program may have helped attract more effective teachers to the district and increased retention rates in hard-to-staff schools. The study also concludes:

Teachers hired after the implementation of ProComp demonstrated higher first-year achievement than those hired prior to the program;

Teachers who voluntarily opted into ProComp slightly outperformed colleagues who did not opt in;

Teachers participating in ProComp hold more favorable views of ProComp than those who are not in the system; and

By a 3-to-1 margin, teachers in ProComp indicated they believed the program could motivate teachers to improve instructional practices. Furthermore, participants in ProComp indicating the program would ultimately improve student achievement outnumbered those who disagreed by a 2-to-1 margin.3